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While Southeast Asian policymakers understand the need for an accelerated energy transition, implementation and financing remain complex. Despite its reputation as a climate laggard, Australia is positioning itself to become a renewable energy superpower in the Asia Pacific under its ‘Southeast Asia Economic Strategies 2040’ and ‘Future Made in Australia’ frameworks. Southeast Asia and Australia can stand to benefit from partnering on the climate transition.
The Global Climate Risk Index 2025 ranks Myanmar, the Philippines and Cambodia among the twenty most affected countries by climate change from 1993 to 2022. While Asia Pacific nations need to increase climate resilience investments twelvefold, progress is hindered by policy gaps and insufficient funding.
In 2023, over half of Asia’s energy consumption came from fossil fuels. Indonesia and Vietnam respectively sourced 42.7 per cent and 47.5 of their energy from coal, while Malaysia and Thailand sourced more than a third from oil. Fossil fuel subsidies complicate this situation, with Indonesia and Malaysia spending nearly US$29 billion and US$6 billion respectively on petroleum subsidies in 2023.
Many climate financing initiatives in Southeast Asia are supported by developed nations, particularly the United States and European Union. Through the Just Energy Transition Partnership (JETP), Indonesia and Vietnam have secured US$20 billion and US$15.5 billion respectively for their energy transitions from the International Partners Group (IPG).
But some in Indonesia have expressed scepticism about the IPG’s commitment to JETP due to the slow allocation of funding. And the COP29 deal, where rich nations pledged US$300 billion annually to assist developing nations, is threatened by US President Donald Trump’s return to office.
Within his first months in office, Trump has signalled a US withdrawal from its leadership role in the global climate transition by calling climate change a ‘hoax’, expediting oil drilling permits and withdrawing from the Paris Agreement. This could shake JETP as US funding constitutes 17.9 per cent of total IPG funding to Indonesia. Energy and Mineral Resources Minister Bahlil Lahadalia has also further questioned Indonesia’s participation in the Paris Agreement.
While the European Union is also a leading energy transition advocate, its policies may not suit developing nations in Southeast Asia. The introduction of the EU Carbon Border Adjustment Mechanism in 2026 will require exporters of carbon-intensive goods, such as cement, steel and fertilisers, to buy certificates for their greenhouse gas emissions. This could result in significant economic losses for ASEAN countries, complicating their efforts to balance decarbonisation and economic growth within a poor investment landscape.
But ASEAN countries can strategically partner with Australia for support. Though Australia accounts for 33.6 per cent of global coal exports and is the second largest coal supplier to Southeast Asia, coal exports to several ASEAN nations exhibited negative growth between 2019–23.
Despite the slow pace of its transition away from coal, Australia is a valuable partner for Southeast Asia in its energy transition. Australia has a history of effective collaboration with ASEAN through strong institutional frameworks, including the Asia-Pacific Economic Cooperation (APEC) grouping and the East Asia Summit. The 2024 APEC Energy Ministerial Meeting introduced policy guidance for clean energy development and addressed shared climate and energy transition concerns.
These high-ranking forums have strengthened Australia–ASEAN ties, leading to the signing of the ASEAN–Australia–New Zealand Free Trade Agreement in 2010 and various bilateral free trade agreements with ASEAN countries between 2003–2020. These have formed the basis for climate initiatives like the 2022 Singapore–Australia Green Economic Agreement. But as of 2023, Australia is still not among the top 10 sources of foreign direct investment for most Southeast Asian nations, except for Singapore and Malaysia.
The Regional Comprehensive Economic Partnership (RCEP) highlights Australia’s recognition that collaboration with ASEAN is necessary after years of lagging investment. RCEP enables Australia to expand its investment to ASEAN countries by simplifying rules of origins, leading to a more integrated regional supply chain. This is crucial in producing energy transition technologies such as EV batteries, where resources are fragmented across parties. The Indo-Pacific Economic Framework has further formalised investment standards and facilitated information sharing, fostering cooperation in the energy transition.
Australia also has the technological know-how and is endowed with abundant renewable energy resources, strong capital markets and a sophisticated national savings pool. Australia aims to be a renewable energy superpower through its ‘Future Made in Australia’ framework and promotes regional climate initiatives under its ‘Southeast Asia Economic Strategy 2040’.
Between 2020–24, Australia signed several memoranda of understanding with Indonesia on critical minerals and clean energy development, assigning a ‘deal team’ to enhance investment opportunities. Despite institutional and practical blockages in Indonesia’s energy transition, a US$126.5 million (AU$200 million) capacity-building fund, announced in November 2024, signals Australia’s commitment to accelerating the regional energy transition.
With Australia and Southeast Asia now prioritising economic transformation and decarbonisation, Canberra and ASEAN nations must leverage their robust existing institutional frameworks to pursue integrated solutions for climate change. Considering Southeast Asia’s needs and the importance of the energy transition, Australia should engage more actively at the implementation level with its neighbours — a relationship that demands more attention now than ever.
Cahyani Widi Larasakti is PhD Candidate at The University of Melbourne.
EAF |Australia |Australia can help flip the switch on Southeast Asia’s energy transition